Medicare, Hospitals at Odds Over Payment for Sicker Patients

A patient classification system that was installed in 2008 to better measure the severity of illnesses and payment accuracy for Medicare beneficiaries shows that hospitals are successfully contending with a more complex and costlier caseload, the American Hospital Association reports.

And now that the federal government's Medicare Severity-adjusted Diagnostic Related Groups data makes that clear, AHA officials say, the federal government doesn't want to pay for the results.

The Medicare ranks include about 48 million people, with 10,000 Baby Boomers becoming eligible each day. An AHA Trend Watch cites data sources showing that four out of five Medicare beneficiaries suffer from chronic disease and two-thirds of them have two or more chronic diseases.

For example, the prevalence of obesity among Medicare beneficiaries has doubled since 1987. In 2009-10 38% of seniors were obese. Diabetes among seniors has increased from 18% in 2002 to nearly 27% in 2010.

"Chronic disease is rising among Medicare patients," says Caroline Steinberg, vice president for trends analysis at AHA. "It is not at all surprising that the new patient classification system that they developed to better account for the resources used by sicker patients is picking up more resource use and resulting in a higher case mix and leading to higher Medicare payments because of this."